Your Partner in Real Estate

Month

March 2012

CNN reported today that home values are at an all time low – back to values seen in 2002. This is a great time to get in the market and buy a home. Sacramento area inventory is low since equity sellers are not entering the market and short sales and bank owned listings are down, but if you have persistence and patience, it’s a great time to start working with a realtor for your home purchase. Please let me know if I can be of any assistance.

Yesterday brought us some good news for some homeowners who would love to refinance to the current low rates, but haven’t been able to since they are underwater! HUD, or the US Department of Housing and Urban Development, announced that they have agreed to make FHA Streamline Refinance opportunities more affordable beginning June 11, 2012 for homeowners who last purchased or refinanced their home prior to May 31, 2009. Both the Upfront Mortgage Insurance Premium (MIP) and the annual premium will decrease significantly over current rates! If you have an FHA loan, you may qualify to refinance your mortgage and save hundreds of dollars per month, EVEN if your home is underwater!

Qualifications

Mortgage must be FHA, not conventional (ie, you probably put 3.5% down when you bought your house)

Mortgage must have been originated prior to 5/31/09, or last refinanced prior to 5/31/09.

Borrower must be current on their mortgage payments

Call your lender for details to see if you qualify! I have great recommendations for Sacramento area mortgage lenders on my “vendors” page! Good luck!

A common misconception is that anyone at all can qualify for a short sale and not have a valid reason for it, while the truth is that this is most likely the exception to the norm. Although you may know someone who had their short sale request accepted with no apparent reason or hardship, I would have to argue that 99% of successful short sales have what is called a “valid hardship”. A valid hardship is a valid and tangible reason why a homeowner cannot make their mortgage payments anymore. These would include but are not limited to the following:

Job loss (Unemployment)

Change in employment causing decrease in earned income (Underemployment)

Divorce or legal separation

Death of borrower or one of main income earners

Medical illness causing extreme hardship due to excessive bills

Long term disability

Relocation of job far enough away that homeowner cannot commute

Business failure

Simply not wanting to keep a home that is now underwater is not a valid hardship, or an accepted reason, for a bank or lender to agree to a short sale request. Also, if one of the above situations does not create enough of a hardship, the bank may also not agree to the short sale. If an individual earning a $200K per year salary is getting a divorce and has a $1,000 per month mortgage payment, the bank or lender will very well come back and let that homeowner know that they should cut down on their vacation and shoe shopping habit and continue to pay their mortgage….because they can definitely afford to do so.

The Invasive Short Sale Application

A short sale is a very invasive process, and the lender will require piles of personal information to be submitted with the short sale application. Upon hearing these requests, a homeowner may decide to not provide this information and choose to walk away from their home instead. Going through this process is typically lengthy, frustrating, and ultimately a huge test of one’s patience. In addition to the listing agreement & purchase offer, some of the documents a lender will ask for as part of the short sale process will include, but are not limited to the following:

You may also be asked for a breakout of your assets and liabilities, including the amount you have in any savings accounts, CDs, stocks/bonds, retirement accounts, and personal property. An asset rich individual may not be approved for a short sale because they can afford to keep their home, but are simply choosing NOT to.

Estimated HUD statement from your Escrow Company outlining the net income the bank will receive after commissions and taxes, escrow & title, etc are paid

Check with your bank or lender to see what additional information they may ask you for!

Consult a Real Estate Attorney, a CPA, and a Realtor

When considering completing a short sale or a foreclosure, I always recommend that a homeowner speak with a real estate attorney to discuss their personal situation. A good real estate attorney will sit down and discuss the impacts to the homeowners life…including the impacts to their credit scores, possibility to purchase or obtain a loan again in the future, or even the impact to their careers! Yes, some careers may even be terminated over a foreclosure – so it’s imperative you know all the facts. My local real estate attorney referral for the Sacramento area would be Steve Beede. (See vendor page for contact info.) Steve has an affordable one time personal consultation where he will discuss your situation so you know how best to move forward. A short sale is not always the best answer for every homeowner…but neither is a foreclosure. As I mentioned above, an asset rich individual may not be approved for a short sale because they could afford to keep their home but are choosing not to. It’s best to consult with a real estate attorney, a CPA, and a realtor before listing your property. It pays to know the facts, figures, and impacts to you and your family.

Contact Your Lender for More Information

For more detailed information on your specific lender, check out these links to some of the major lenders’ short sale sites:

The Think Big Work Small guys are entertaining to watch…and their comments on the possible upcoming principal reduction “help” leaves you with some good things to think about. Do we REALLY want to entice millions of good homeowners to stop making their mortgage payments to qualify for a principal reduction? I think not.